There is no question that the real estate market in Manhattan Beach has been on fire since the beginning of 2013. Record low inventory and intense demand for luxury homes and prime locations has created a building boom not seen in a long while. Multiple offer situations seem to be the norm and the number of all cash buyers continues to drive this already competitive market. This continued demand from buyers and builders alike has driven prices upward to record numbers and nowhere is the demand greater than in the sand section.

The most recent example was the walkstreet home located at 2401 Manhattan Ave. Just a block to the beach and having fantastic corner lot ocean views this home was certainly going to interest both the owner/user looking for a great location and builders seeking the same. The home was listed at $2,495,000 which is already a huge number for a half lot home but all indications appear that the home had at least 11 offers and sold over $3.0M* which is a staggering number for a home with the limitations that come along with a 1,352 square foot lot. Any future build will be limited to around a max square footage of 2000 feet. The last sale of a new construction half lot (not on a walkstreet which certainly adds value) closed at $3.3M at 124 23rd Street. Over $3.0M for this likely tear down at 2401 Manhattan Ave is a very large number indeed and shows just how far values have come in the past 24 months.

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October showed no signs of a slowdown in the luxury real estate market of Manhattan Beach. 42 homes closed escrow and prices reached new highs with a median home price of $2.1M and an average home price of $2.2M which is well over the previous 18 months. Of the 42 home sales only one was sold below $1,000,000. 12 of the homes sold between $2.0M and $3.0M, 3 homes sold between $3.0M and $4.0M and 3 homes sold above $4.0M. Visit our market trends page to see the current price and market trends for all of Manhattan Beach CA.

Despite a one month uptick in new listings in the sand section of Manhattan Beach, it appears that there’s no real relief in sight as record low inventory continues. There were 64 homes for sale in September of 2011 and as of 11/5/14 there are only 17 current active MLS listings. To a certain extent that lack of inventory for the past 2 straight years has seen home prices rise dramatically. The average sold home price in September 2011 was $1.736M and the average sales price just 2 years later was $2.864M…..a 65% increase.

Whenever the real estate market is on fire, as it is right now in Manhattan Beach, the demand for luxury homes intensifies and builders are happy to take advantage of this dramatic increase in demand…..and why wouldn’t they?

It’s not hard to see why builders are scrambling to buy any fixer, tear down, or even the charming, but smaller, beach bungalow. We’re seeing prices of new construction reach heights that would have seemed impossible not long ago and the usual constraints such as smaller lots, less than ideal locations, and even lot prices well beyond lot values don’t seem to matter.

Sold in May of 2013 (above left – 1952 beach bungalow) for $1,131,000 and currently in escrow (above right – 5 bed/5 bath 3111 square feet) with list price of $3,100,000

128 14th Street in the sand section

Sold in April 2012 (1954 built triplex) for $1,950,000 and currently in escrow (4 bed/5 bath 4000 feet) with list price of $5,995,800.

433 Marine Place in the Sand Section

Very poor condition home at 433 Marine Place sold for $957,000 in March 2012. Home was torn down with 2 new townhomes put on the lot. Townhome at 433 Marine Place (3 bed/4 bath 2000 square feet) selling at $1,979,000….while second townhome at 432 23rd Street (3 bed/4 bath 1929 square feet) sold for $2,152,000

There are countless other recent sales and a number of new construction projects coming on the market in the next few months.

Call/text us at 310-251-2344 for more information or contact us with any questions.

Without question, Manhattan Beach is a “hot” real estate market. As if the number of homes selling over list price with multiple offers doesn’t pose enough of a challenge to entry level buyers, the competition with builders and developers makes it all but impossible. Whenever the market heats up to this extent it seems that every builder, investor and developer wants a piece of the action. Whether it’s flipping a larger but older home, or knocking down the original bungalow to build an estate property, the potential profits are just too enticing for builders…..and that all but eliminates the opportunities for entry level buyers.

These builders are looking for just about any well priced home or piece of property and many get sold before they’ve even gone on the market. The problem is that what these builders consider “tear downs” are the very same homes that many buyers would consider starter homes…and their entry into this high demand community. What might be an affordable original 3 bedroom, 1200 foot home built in the 1940s priced in the low $900s, gets knocked down, quickly developed and soon comes to market as a $3.0M+ mansion. Unfortunately buyers looking to get into this neighborhood are often young professionals or young families interested in the award winning schools, but are priced right out of the market.

128 14th Street – 2012 Sold April 2012 for $1,950,000

128 14th Street – Currently listed at $6,399,000

221 23rd Street sold at 1,013,000 in 2012

221 23rd – Listed for $2,999,000 2014

This isn’t the first time that this has been the struggle and it won’t be the last. Buyers either need to be very patient and wait for these dramatic price increases (and almost instantaneous profits for builders) to ease up, or be willing to overspend a bit to compete with the builders when the home actually does make it to market.

For sellers the time is most certainly right, but they need to be cautious as more often than not they could likely get more money by listing the home and putting it on the open market than selling to a builder without any competition.

One of the more challenging aspects of selling homes in the luxury community of Manhattan Beach, is the “sticker shock” many out of town buyers have when we first start searching for a home. As one of the more expensive markets in the country, buyers are often unprepared for the type, size or condition of the home that they can get for their money. Buyers inevitably compare the home they are selling to the home they are buying and without taking location into consideration, they find that they can often purchase something not even similar to what they’re selling. The greatest surprise comes to buyers from states such as Texas in which they owned a 5000 foot mansion on acres of land for example and the $1.5M that they sold it for translates to a 3 bedroom, 2200 foot townhome in Manhattan Beach with a lot measured in feet and not acres.

The reason for all of this, of course, is that it’s all about location….and the demand for that location. There is such demand for homes in Manhattan Beach which offers great neighborhoods, ocean views, award winning schools, almost perfect weather, proximity to a world class destination beach, and near enough but far enough from the hustle and bustle of Los Angeles, that prices just continue to rise at an often incredible pace. As there is no additional land to build on, even “fixers” or tear downs sell above market value as builders are eager to cash in on the demand for new construction luxury homes.

So what can an out of state buyer do? Research the recent home sales in Manhattan Beach and current listings. Getting comfortable with the fact that, although the prices are dramatically higher than other cities and states, these are the prices and the costs to live in such a high demand area. Southern California has always been one of the most sought after housing destinations in the country and nowhere is that demand greater than life on the coast in Manhattan Beach. Buyers that research values, prices and trends, may still have that initial shock but just having an understanding that these are not “inflated” prices but just the values of the area and down the road when it’s time to sell, they’ll be on the other side of this incredibly strong market.

The chart below represents the median sales prices in Manhattan Beach for the past 2 years with a median price edging ever closer to the $2.0M mark.

Regardless of market conditions sellers frequently think that their home is worth more than it really is. Most sellers think their home is nicer than the one that just sold down the street and offer various details that make their home the most valuable one in the area. That will never change.

But this market is different. The luxury market of Manhattan Beach real estate really is hot and prices are going up, but are sellers taking those expected increases to unrealistic levels? As Realtors we see what values, why, and try to use the latest sales information to see where things are going and how quickly. In this market, however, sellers often seem to think that regardless of how their home compares with the latest home sale….theirs is better….and worth far more.

It seems in this local market that we’re starting to see homes sit on the market for longer and it may soon no longer be a “make me move” or “name your price” type of market. As homes sit longer, inventory will rise and once the perception is created that buyers may be able to get a better price if they wait….they’ll likely wait.

Sellers need to be cautious not to overprice their homes and use the expert opinions of local real estate specialists to explain what the home is worth and why it may not be worth what the seller thinks it worth.

Affordability doesn’t seem to be a challenge in this slice of the luxury market, but overpricing may just lead to a slow down of this hot market and a flattening of prices.

There’s no question that builders have jumped wholeheartedly back into the luxury market of Manhattan Beach as prices have soared and seem poised to continue so for quite a while due to the low inventory and pent up demand. Recent prices on new construction homes and even flips have surprised even the most optimistic and it’s not surprise that many original condition homes and fixers are being sold for lot value. Most of these sales are to builders but that’s not always the case as many buyers are willing to build their dream home and pay a premium over what builders are willing to pay. I wanted to thank Mike Michalski from South Bay Brokers for putting this list together.

The best option for those feeling priced out of the neighborhood is the area of El Porto which is the northernmost section. In an attempt to shed the El Porto moniker the area has been renamed North Manhattan but to most in the area it’s still known as El Porto.

So why is El Porto so much more affordable?

As with everything in real estate, lower prices involve tradeoffs and compromises. In the case of El Porto it generally comes down to lot sizes and all of the differences those smaller lots create. While many lots in the sand section are 30×90 most El Porto lots were split long ago and are “half lots” at 30×45 (with some variations) This doesn’t just mean twice as many homes, but impacts the layout and feel as well. One of the appeals to the sand section are the pedestrian only walkstreets that most homes face. The back of the homes are on, what feel to be, smaller alleys with all of the garages, but homes are all built with the primary open areas facing the the walkstreets and the ocean. El Porto doesn’t have walkstreets so all of the homes face the streets or alleys so the front of all homes consists of garages (or in some really original bungalows simply a space for one car). In addition smaller lots generally limit the square footage that a new home can offer. The good news for buyers is that the limited size of new construction homes greatly limits the appeal to builders who focus on larger lots. This limits the competition and helps keep prices from skyrocketing during building booms.

Pros of El Porto:

Much more affordable prices

Proximity to the beach

Many homes feature great views due to the steepness of the streets

Ideal for commuters as it can take 15 minutes off of a drive compared with other areas

Cons of El Porto:

Smaller homes with little to no outdoor areas (roofdecks are not allowed in Manhattan Beach)

Very narrow streets (numbered streets are generally wider than named streets but all are narrow)

Homes face garages so curb appeal less than other sand section areas.

Smaller lots means more homes and has a more congested feel

Very little parking. At best homes have 2 car garage with many older homes having no garages

As most home buyers read about the market they have, inevitably heard that inventory is down and that it is a “seller’s market” which is certainly the case but both may be a drastic understatement at the moment. Inventory is at historic lows with both active homes for sale and sold homes being dramatically below the norm. The chart below shows the past 5 years with monthly numbers indicating the number of homes active on the MLS (light green), the number of pending homes sales or homes in escrow (red line), and the number of homes sold or escrows closed (dark green) that month.

The numbers are pretty staggering with February 2014 having only 26 closed sales and 36 current homes active on the market. Contrast that with February 2009 with only 25 closed escrows and 284 homes available for buyers and you’ll understand why buyers are willing to do just about anything and pay any price to get a home in this luxury coastal community. Due to low interest rates, and Manhattan Beach schools surpassing even their own record test scores, the demand for homes is as strong as ever.